Strong selective sectoral themes in oil and gas sector — RHB Research
KUCHING: Analysts at RHB Research Institute Sdn Bhd ( RHB Research) believe risk service contractors ( RSC) are an overplayed theme in the smallcap space within the oil and gas (O& G) sector, expecting interest to wane once newsflow becomes more fluid.
The research firm in a report yesterday highlighted that more trading opportunities were likely to arise from the next syariah compliance review.
“After a long drought of news on RSCs in 2013, market interest in marginal oilfield is once again rejuvenated upon the announcement of two recently- signed contracts,” it observed.
One of the contracts was for the Uzma Bhd ( Uzma) and EQ Petroleum Developments Malaysia Sdn Bhd joint venture (JV) bineg awarded a contract to develop Tanjung Baram, off Lutong in Sarawak.
The second was Petronas’ wholly- owned marginal field expert Vestigo Petroleum awarded the RSC to develop and manage Tembikai in Terengganu, albeit without a partner – a deviation from the other four RSCs.
“While stock prices of smallcap, RSC-related players like Uzma and Scomi Energy Services Bhd had an incredible run in CY13, we believe premiums for such counters will wane once news flow on RSCs become more fluid,” they opined.
“Uzma’s recent price correction is a testimony that market expectations have been priced in. Therefore, we believe that the next catalyst, barring any negative development, will be the execution of the RSCs by respective winners.”
Looking at other potential RSC winners to look forward to, RHB Research noted there were at least 10 fields up for bidding last year, but excluding the first three RSCs – Berantai, Balai and the Kapal-BanangMeranti cluster – only two have been announced thus far.
“We do not discount the possibility that the first-generation RSC winners, SapuraKencana Petroleum Bhd, Dialog Group Bhd and Petra Energy Bhd will still be interested in securing more such contracts.
“These companies’ successes in hitting first oil within their respective fields are testament to their capabilities. As such, we will not be surprised if they decide to commit to a second RSC on a standalone basis.”
Other O& G players that the firm believe will be financially capable of undertaking such projects are Bumi Armada Bhd and Wah Seong Corporation Bhd.